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Accounting /Real Estate Notes PSI 2.0 Exam Prep: Financing Part 2

Real Estate Notes PSI 2.0 Exam Prep: Financing Part 2

Accounting30 CardsCreated about 2 months ago

This deck covers key concepts and terms related to real estate financing, including loan underwriting, mortgage clauses, and fraud detection.

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Conceal their real identity behind someone else's name and credit

straw buyer
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Key Terms

Term
Definition
Conceal their real identity behind someone else's name and credit
straw buyer
An appraiser secretly works with a borrower and provides a misleading appraisal report to the lender
Inflated appraisals
It is lending money at an excessive (illegal) rate
Usury
These are typically exempt from usury?
Credit cards, retail installment contracts, and consumer leases
Four primary factors in loan underwriting include:
Income, Debt Ratio, Credit Score, Credit History
What are three things Loan underwriters analyze before approving a loan?
borrower’s credit, capacity, and collateral.
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Real Estate Notes PSI 2.0 Exam Prep: Financing Part 2
TermDefinition
Conceal their real identity behind someone else's name and credit
straw buyer
An appraiser secretly works with a borrower and provides a misleading appraisal report to the lender
Inflated appraisals
It is lending money at an excessive (illegal) rate
Usury
These are typically exempt from usury?
Credit cards, retail installment contracts, and consumer leases
Four primary factors in loan underwriting include:
Income, Debt Ratio, Credit Score, Credit History
What are three things Loan underwriters analyze before approving a loan?
borrower’s credit, capacity, and collateral.
How do you calculate housing ratio?
borrower’s projected monthly housing expense (principal, interest, taxes, insurance, second liens, and association fees) divided by income.; HOUSING EXPENSES/INCOME
What are the required housing ratio (aprox) based on the loan type?
Conventional: 25 - 28%; FHA: 31% - 40%; VA: Does not apply
How do you calculate debt-to-income ratio?
total of all the buyer’s debt obligations divided by income.
What are the required debt-to-income ratio (aprox) based on the loan type?
Conventional: 33 - 36%; FHA: 43% - 51%; VA: cannot exceed 41%
Conventional loans typically require credit scores:
620 and Above
FHA borrowers must have a minimum credit score of
580 to qualify for a 3.5% down payment; borrowers with credit scores between 500 and 579 may have to put down as much as 10%.
A balloon payment
has some that some principal remains at the end of the loan term.
It is a standardized measure for interest rates and other costs of the loan.
Annual percentage rate
What wins when determine the debt to income and housing ratio?
The lender will choose whichever amount is the lowest
Ads that mention general financing terms, such as “low down payment” or “easy financing,”
do not require additional disclosure. If Bo had gotten more specific (e.g., “10-year loan with 0% down”) he would need to include more information.
What factors directly affect an adjustable rate mortgage?
Rate, index, and margin
When buyers haven’t spoken to their bank or another lender, how should you handle the situation?
Offer to refer them to a lender and prepare them for the meeting.
How many parties does a deed of trust involve?
the trustor (borrower), the beneficiary (the lender) and the trustee (an independent third party who holds the deed of trust).
When a mortgage is used as a security instrument, who holds the mortgage and the promissory note?
The lender holds the mortgage and the note.
What is the difference between a pre-approval letter and a pre-qualification letter?
A pre-approval has been verified by the lender; thus it provides more assurance while the pre-qualification letter does not
Are early prepayment penalties also applied to refinance
Yes
What is TRID?
TILA-RESPA Integrated Disclosures
When considering loan risk, which two items will lenders consider in equal measure?
The property's value (as underlying collateral) and the borrower's ability to repay the loan will be equal considerations for the lender.
Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full?
Defeasance
What Item is the most important in detecting mortgage fraud?
The original sales agreement and any addenda
The mortgage becomes a lien on the property, but title remains with the buyer. Foreclosure proceedings in a this theory state may be more difficult for the lender.
Lien Theory State
Phoebe’s gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender’s qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What’s the maximum housing payment she can afford?
The maximum house payment is the lesser of the amounts calculated using both ratios. DTI: $4,200 x .36 = $1,512. $1,512 – $360 = $1,152. Housing ratio: $4,200 x .28 = $1,176. Phoebe’s maximum payment is $1,152.
Manuel is selling his home to Selena. He has an existing loan that he’ll continue to make payments on, and he’s extending credit to Selena for the balance of the purchase price. She will make monthly payments to him. What type of financing are the parties using in this transaction?
Wrap-around loan
Are RESPA requirements exempt from commercial loans?
Yes, they are